We make air contuioners and furnaces.

We provide cli moto control in the tiome,


and coffee. 'lo better compi'i*,Pepsi might decidc to sell additional beverages wtiose growth rate appears to he promising.

A business can be defined in terms of three dimensions! customer groups,, customer needs, and technology,3*' Consider a small company that defines its business as designing incandescent lighting systems for television studios. Its customer group is television studios; the customer need is lighting; and the technology is incandescent lighting.'the company might want to expand. It could make lighting for other customer groups, such as homes, factories, and offices; or it could supply other services needed by television studios, such as heating, ventilation. Or ait conditioning- ft could desist other lighting technologies for television studios, as infrared or ultraviolet lighting.

large companies normally manage quite different businesses, each requiring its own strategy. General lilectric. classified its businesses into 'til strategic business units (SitUsi. An SUU has three characteristics:

1. It is a single business or collection of related businesses that can ho planned separately fro ni the rest of the company

2. It has its own set of corn pel i tors.

3. it has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affectlrijj profit.

The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding. Senior management knows that its portfolio of businesses usually includes a number of "yesterday's has-litre us1" as well as '"tomorrow's breadw inners," Yet u cannot relyoti impressions; it needs analytical mnls to classify its businesses by profit potential.2.

Assessing Growth Opportunities

Assessing growth opportunities involves planning new businesses, downsizing, or terminating older businesses. The company's plans for existing businesses allow it to project total sales and profits, If there Is a gap between future desired sales and projected sales, corporate management will have to develop or acquire new businesses to fill it -

Figure 2-5 illustrates this strategic-planning gap for a major manufacturer of blank compact disks called Musicale (name disguised). The loivesl curve projects the expected sales uvcr the next five years horn the current business portfolio. The highest Curve describes desired sales over the same period. Evidently, the company wants to grow much faster than its current husin esses will permit. I low can il Til I he strategic-pla lining gap?

'Hie first option is to identify opportunities to achieve further growth within current businesses (intensive Opportunities), The scconti is to identify opportunities to build Or acquire businesses that are related to current businesses integrative opportunities). The third is lo Identify opportunities to add attractive businesses that are unrelated to current businesses (diversification opportunities).

'■.."'.':"''. ■ Corporate managements first couisfr of action should be a review of opportunities for improving existing businesses, Ansoff proposed a useful framework for ¿1electing new intensive growth opportunities called a "product-market expansion grid" (Figure 2.G).ia

Strategic-planning Cap

Time (years)

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